Retirees preparing to step back, not away

When Nancy Norton took early retirement after 26 years at Monsanto Co. to care for her terminally ill mother, she thought she had left the corporate world for good.

But three months after her mother passed away, Monsanto offered the 53-year-old audit manager a deal she couldn't refuse. Through a program aimed at tapping retirees' skills, she took an assignment that allowed her to resume working without being thrust back into a full-time job and without giving up her retiree benefits.

Monsanto's program--a rarity in the business world--is a harbinger of a future in which retirees and older workers will be offered the chance to leave work gradually, opting for more flexible hours and less responsibility until they're ready to retire altogether.

Such programs represent a dramatic shift in a society that for decades devised increasingly rich incentives to replace older employees with less-expensive younger workers.

Now, with the oldest of 76 million Baby Boomers turning 60 next year, employers face a new challenge. The mass retirement over the next three decades threatens to drain companies of vital skills while hammering the nation's already-strained pension system. For every five working-age adults in 2000, there was one person age 65 or older; that ratio will be lower than 3-1 by 2030, according to U.S. Census Bureau projections.

"It's an incredibly serious problem," said retirement expert Rudolph Penner, a senior fellow at the Washington-based Urban Institute. "Almost every projection of economic growth has quite a substantial slowdown in coming decades because of the slowdown in the rate of growth of the labor force."

Keeping people around

One solution is to keep people working longer--a move in step with surveys indicating that many older employees want to continue working out of financial need or a desire to stay engaged.

Many would be encouraged to postpone retirement longer if they could cut back gradually, according to Penner and others who advocate making phased retirement a routine benefit.

A case in point is Norton, who had planned to retire at 55 before her mother's illness moved up her timetable. The 53-year-old no longer has a target date for full retirement.

"I'm so happy as a retiree working," said Norton, who traveled five weeks in Africa last year, stopping in to complete an assignment for Monsanto in Johannesburg. "It's so stress-free."

One reason employers have steered clear of phased retirement is the potential barrier posed by pension rules and age-discrimination laws. Programs such as Monsanto's get around regulatory and legal constraints by requiring that retirees be gone from the company at least six months before hiring on again part time.

Monsanto's program is open to employees of all ages who leave in good standing, but they must compete for assignments with agencies that provide temporary workers.

Even so, many of the 300 retirees in the program have had no trouble landing work, said Deb Lebryk, who heads the program.

"Many have built very strong relationships here, and they network," she said. "Many times they have their next role lined up before they leave their existing one."

A pending rule change by the Internal Revenue Service would give companies far more flexibility by allowing workers to start drawing pension benefits at age 59 1/2 while working fewer hours. Their pension payments would be prorated based on how many hours they work.

To collect benefits under existing rules, workers age 64 or younger must leave, forcing those who need pension payments to quit and take part-time jobs elsewhere.

"Staying at their career employer is far superior," said retirement expert Sylvester Schieber, director of research at human resources consultant Watson Wyatt Worldwide. "They're probably going to be more productive and create more value for the economy and themselves using what they've learned in their jobs."

Some industries in crisis

Employers in industries facing critical labor shortages are at the forefront of phased retirement. In health care, for instance, studies indicate half of all working nurses will reach retirement age by 2015.

"These employers know they will have to do something to attract a labor pool that will be older, but I think [phased retirement] is something that will become more universal," said Deborah Russell, director of economic security for AARP, the advocacy group for people 50 and older.

Among the pioneers is St. Louis-based SSM Health Care, one of the country's largest Catholic hospital systems.

SSM won an exemption from the IRS to allow employees to retire as early as age 60, then return to work the next day while drawing retirement benefits.

"We look at the demographics, and it's pretty obvious that it's a survival skill for a forward-thinking employer to maintain a healthy environment for older workers," said Steven Barney, SSM human resources senior vice president.